Brands matter more than ever

15 Feb Brands matter more than ever

Impact on sales, margins and costs.

We were talking to Herman Fourie, a qualified Chartered Accountant with his own accounting practise and the CEO of Barno which has survived and thrived over 60 years of economic highs and lows. With the SA growth rate expected to drop below 1%, what advice does Herman have for other CEO’s?

Herman’s advice has not changed over the years but it always provides perspective.

“There are only 3 things that one can do to increase profitability. Increase sales. Improve Margins. Reduce costs. Ideally, all three.”

How then can Sherpa play a role in helping businesses to navigate through the recessionary times that we all face? What is the relevance of Sherpa, at a time when businesses look to cut costs?

Companies tend to focus on ROI marketing principles because “we can measure results”. This makes sense but consider that, according to Millward Brown’s “BrandZ” report, the total value of the Top 100 brands increased 12% to $2.9 trillion in the period 2013-2014. Not bad considering that a brand is essentially something intangible.

While B2C companies understand the importance of a brand, B2B companies seldom get it. In our view, that’s a costly mistake.

As Herman points out, a stagnant economy means that any sales growth will generally come from taking business away from competitors which could mean having to offer lower prices. That’s not something you want to do when you’re trying to manage costs as well. A strong brand impacts not only on customer loyalty but market value as well. Attracting and retaining customers is easier when they perceive a brand to be prestigious and of a high quality. True brands promise great things, which attracts attention. Brand equity also keeps costs down – it costs about 8 times more to acquire a new customer than it does to retain a loyal customer.

A McKinsey 2012 study of more than 700 executives found that B2B purchasing decisions were less value-driven and that supplier’s brands – or, their value propositions – were key in their decision making. In fact, US executives cited that 18% of a purchasing decision was influenced by brand compared to the 17% attributed to the sales effort. The researchers concluded that “strong brands consistently outperform the market average” and “beat the market”.

Closer to home, one only has to look at Herman Fourie’s Barno for proof. In the most competitive of B2B environments, Barno – as a small company compared to corporates – has remained a premium brand for decades and experienced healthy and profitable growth. The Barno brand stands out in its industry – its clients buy more than the products.

Some basic and practical areas for saving costs

“The first step is understanding the essence of your brand, a process which we guide our clients through. Business owners often have fixed ideas of what value their products represent. If they’re wrong or just don’t understand what makes a brand, it has a multiplier effect as far as costs and sales are concerned. For example, you’re spending money driving prospects to your website but, when they get there, they simply don’t connect with you and leave. Or, your sales team – a huge expense – is not positioning your true value accurately or worse, selling on price. Another simple example is the money that you invest in a brochure or social media campaign – if it is not presenting the essence of your brand, you might as well write off that year’s entire marketing budget,” warns Sherpa CEO Gary Hendrickse.

With social media platforms becoming such a critical marketing channel, messaging that your target audience can relate to is absolutely essential.

Gary says that the only factor preventing a smaller company from becoming a brand is their belief that brands are only for corporates. “You don’t need Nike-like advertising budgets. You’ll need time with us, an open mind and importantly, a steely determination to stand out in the market,” says Gary.